Transcript: Investors serve, can women’s tennis volley?

This is an audio transcript of the FT News Briefing podcast episode: ‘Investors serve, can women’s tennis volley?’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, July 11th, and this is your FT News Briefing.

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Marc Filippino
The Archegos saga is coming to a close and women’s tennis is getting a big influx of cash.

Josh Noble
It’s a private equity firm basically saying we think women’s tennis is significantly undervalued and we can catch up with the men’s game.

Marc Filippino
Plus, cheap online retailers like Teemu and Shein have exploded in popularity, and that’s got Amazon a little worried. I’m Marc Filippino and here’s the news you need to start your day.

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Archegos Capital Management founder Bill Hwang was found guilty of fraud in market manipulation yesterday. Hwang’s fund imploded three years ago, sending waves through global equity markets. Plus, it caused billions of dollars in losses for banks. New York prosecutors argued that he deceived the market with secretive trading strategies, which then drove up the share price of a handful of media and tech groups until there was a big sell-off and Archegos collapsed. But Hwang’s lawyer said he, quote, bought these stocks because he loved them. Former Archegos chief financial officer Patrick Halligan was also found guilty of racketeering and fraud. They’ll both be sentenced on October 28th.

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There is only one place to be this weekend, and that’s Centre Court at Wimbledon. If you can swing it, the women’s final is happening Saturday. It’s one of the few times a year that casual fans like me tune into the game. But the Women’s Tennis Association is trying to change all that. My colleague Josh Noble has been reporting on how the WTA is looking to raise its profile, and he joins me now. Hey, Josh.

Josh Noble
Hi, Marc.

Marc Filippino
So, Josh, there’s a lot of attention on tennis right now, but also in general and an increasing amount on the women’s side. What kind of capital has the WTA been able to tap into?

Josh Noble
Yeah. So it’s about a year, just over a year now since CVC Capital Partners is a European-based private equity firm, got involved with the WTA. As part of the deal, they set up this kind of new entity called WTA Ventures that controls all the commercial revenue for the WTA — that’s broadcast, data, sponsorship, stuff like that. More recently than that, a couple of months ago, the Saudi Arabian sovereign wealth fund, they agreed on this, they call it multiyear partnership, involves becoming the naming partner of the WTA rankings. But then the other big thing is they’re moving the WTA finals to Riyadh for the next three years. And the prize money is going up quite significantly as a result.

Marc Filippino
And the clear momentum here. But can you back up a little bit and just walk me through some of the challenges the professional tour has faced and why it needed this money?

Josh Noble
Well, when Serena Williams was playing, you had this huge superstar that you could kind of hang the rest of women’s tennis around, you know, the Grand Slams, the tours. At the moment, you’ve got a kind of rotating cast of very accomplished female players, but there’s no sort of strong narrative around who’s the best, who’s the superstar. And I think in a world where sports sort of thrive on narrative, it becomes so important that casual fans know exactly which people they want to watch. They want to know what the story is. And I think at the moment, women’s tennis in particular is struggling to tell it.

Marc Filippino
So now that the WTA has these two investors that we mentioned CVC Capital and Saudi Arabia’s Public Investment Fund, how is it looking to address these challenges that you mentioned?

Josh Noble
Well they’re talking a lot about brand. So I think a lot of it will be investing in social media ad campaigns, basically just trying to build the profile of the WTA and the players who play on the tour. It’s a private equity firm, basically saying we think women’s tennis is significantly undervalued, and we can use our expertise and our money to catch up with the men’s game.

Marc Filippino
Is there any pushback at all to these plans? I mean, Saudi Arabia has been making big moves into sports lately. Not everyone is thrilled about it.

Josh Noble
Yeah, well, I think whenever a sports business goes into a partnership with the Saudi Arabian government, it’s clearly going to provoke a reaction. We saw two former superstar female players come out before they agreed the deal, saying that it didn’t reflect the values of the WTA and they shouldn’t do it. Rights campaigners have said it’s sportswashing and that it’s just a bad thing for international sports bodies to be doing. So yeah, there’s been a good amount of criticism for sure.

Marc Filippino
Criticisms aside, though, Josh, this is money, and money does tend to change things. To what extent do you think this could elevate the profile of the WTA and potentially change the game itself?

Josh Noble
Well, you’re right, money does help a lot. However, you can’t buy an audience. You can’t pay people to care. And that’s been one of the lessons from some of Saudi Arabia’s other big investments. You know, whether it’s the Saudi Pro League, the domestic football league or LIV golf. Even so, ultimately the sport itself has to deliver.

Marc Filippino
Josh Noble is the FT’s sports editor. Thanks, Josh.

Josh Noble
Thank you.

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Marc Filippino
All right. A few months ago, we played this delightful little earworm on the show.

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Marc Filippino
Kind of gets stuck in your head, right? Well, Amazon thinks so too. And it wants some of that attention. Here to explain how the ecommerce giant is looking to compete with Chinese rivals like Temu and Shein is my colleague Ryan McMorrow. He writes about tech in China for the FT. So Ryan what’s Amazon’s plan here?

Ryan McMorrow
So Amazon is basically planning to copy their business models and making use of this tax loophole that allows companies that ship direct to consumers cross-border to not pay import taxes. That seems to be their strategy for fighting back against these Chinese companies as they flood the US and Europe with really cheap Chinese goods, a lot of the times direct from factories to shoppers.

Marc Filippino
OK, so Amazon wants to copy how Shein and Temu get around paying certain taxes. Ryan, it might be helpful to understand how Amazon’s current business model works.

Ryan McMorrow
So ordinarily, a seller on Amazon will buy a huge quantity of something, put that in the cargo container, ship it across the Pacific Ocean. It lands in, say, the port of Long Beach. The seller will pay import tax on that, and then it will go into Amazon’s huge distribution centre so that when you’re sitting at home and buy something, it’ll be at your door in a day or two.

Marc Filippino
And what is the strategy that Amazon wants to copy from Shein and Temu?

Ryan McMorrow
This new model, which the Chinese cross-border companies like Temu and Shein use, in which Amazon is copying will work like this. You’ll buy something at home. It will be shipped to an Amazon warehouse in China. And from there, Amazon will fly it to the US and put it into its normal distribution centre. And the presentation that Amazon gave to sellers as they try to get them on board, showed that it would take an estimated nine to 11 days to get to shoppers instead of the one to two days.

Marc Filippino
OK, so Amazon is essentially cutting out the middleman, the seller here. And the key thing is that it’ll be cheaper because you’re not paying tax. Yeah?

Ryan McMorrow
Yeah. Exactly. The import tax is out of the equation so it’ll be cheaper. And the goods that Amazon are targeting for this is like very ultra-low-cost goods into what will be a new section from what it seems at the moment it will just be on its app. It won’t be on its website. But I guess that could change as they, get started and see how US shoppers like it.

Marc Filippino
And put this into context for me, Ryan. How important is this move for Amazon? Because it is doing pretty well. I mean, it is Amazon after all. So what’s the scale of the competition that it’s facing from Temu and Shein?

Ryan McMorrow
Yeah, I mean I think it’s very much a defensive move from Amazon, which is seeing these Chinese companies rapidly gain millions of customers in the US and Europe. I mean, at the moment, analysts estimate their total market share is still very low, like around 1 per cent or something. But that’s still not nothing. And these Chinese companies, are growing by leaps and bounds at the moment and advertising everywhere to bring on more and more shoppers. If those shoppers that they’re bringing on stick to Shein or stick to Temu, it will eventually cause some damage for Amazon.

Marc Filippino
Now, I know Amazon probably has a little bit of room to play around with here, but are there any risks in experimenting with this new model, given that it seems like it’s also going to hang on to the old model?

Ryan McMorrow
Yeah. Some of the analysts that cover Amazon and cover Pinduoduo, which is the Temu parent company, don’t think that Amazon is really gonna go full throttle into the business, because teaming packages can get to your door pretty quick in the moment. So if Amazon ever got to that speed, it could potentially be a threat to just more established sellers using regular channels on Amazon. We’ll see how much Amazon really invests in building out this model.

Marc Filippino
Ryan McMorrow is the FT’s deputy Beijing bureau chief. Thanks, Ryan.

Ryan McMorrow
Thanks for having me on.

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Marc Filippino
Before we go, we’d love to hear a little bit more about you, how you read and use the FT, and what you like about our show. So we’re running a short survey. Anyone who takes part by August 31st will be entered into a free prize drawing to win £1,000 or your local equivalent. Go to FT.com/FTsurvey2024. There’s also a link in the show notes and the terms and conditions for the prize drawing.

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This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.